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Inventory Planning Blog
- MRP for manufacturing
- DRP for Distribution
- Promotional Planning for Retail
- Parts planning for MRO and Aftermarket Service Parts
Individually, these solutions may do a good job of managing a specific inventory need but today businesses have morphed into multi-faceted, multi-customer facing companies. At the start or top is manufacturing, which feeds all other outlets like distribution and retail.Read More
An inefficient supply chain leads to many issues, among them excess and inactive items, lower than desired customer service levels, out of stocks, higher transportation costs, lost sales and employee and customer dissatisfaction. These inefficiencies result from the lack of proper planning tools, no inventory strategy, poorly trained inventory planners, lack of management support, incomplete inventory visibility, and or unrealistic goals.Read More
Cloud applications for business are becoming more plentiful. Solutions specifically built for the web are in great demand around the world. Companies are deciding to employ a cloud model to reduce capital and operational expenditure, reduce costs, increase business agility, and boost their ability to deliver IT on demand. Supply chain planning is a prime process for the Cloud.Read More
Your company has mission to be the best supplier of your products on the market today. Most companies define what that means in terms of serving the customer. For example, your customers can send you an order and get a return confirmation promptly. You will ship all orders within 24 hours. You will offer a variety of products that is both broad and deep. All great goals to build and grow a business. Now, you go out and spend a ton of money on the inventory. To buy smart, you use economic ordered quantities (EOQ) and take advantage of your vendor’s special deals.Read More
Inventory Performance Improved with Inventory Optimization & Analytics
In simple terms, inventory optimization balances the investment in an inventory to achieve a targeted service level or order fill-rate. There are also financial considerations, constraints that can also be applied in the development of the algorithm. These highly complex algorithms work behind the scene so as not to confuse the user or make them fearful of using optimization to help manage their inventory.
Inventory planning managers are looking for simple ways to reduce waste and improve profitability. It is becoming more apparent that advanced technology can dramatically help but the technology must be affordable, quick to implement, and have a high rate of return (ROI). But global supply chains and competition have increased the complexity and risk.
Advanced inventory planning and optimization solutions enhance the MRP process by automating inventory planning and replenishment. It automatically selects the best forecast algorithm for every item at every location and creates a rolling forecast of from 12 to 36 months. The solution then calculates an optimal stocking quantity for each item based on many critical variables like the lead time, order frequency, and target service level. Variability in demand is also considered along with other key factors ensuring the right amount of stock is available without creating an overstocked situation.
The year 2015 brings a solid outlook of improving global economies and growth opportunities. Balancing near term resilience with longer-term objectives is what is needed now. Reducing costs, buying less, increasing productivity, improving cash flow are critical. Keeping these inventory objectives balanced and in perspective, you need an effective way to rationalize and prioritize important business demands. Improve your competitive advantage responsibly and efficiently without incurring major costs should be at the top of your list. Waiting until its too late in your ordering cycles will invite your customers to buy elsewhere. Reducing the wrong items at the wrong time only exacerbates the issue.
If your company tends to reduce items with the highest investment because it creates a larger reduction faster, what it actually does is create potential stock outs, more backorders and increased expedited shipping – and, even more importantly, customer dissatisfaction. We all know that when customers are unhappy they become former customers. Randomly cutting inventory has been proven repeatedly to be the wrong strategy as does overstocking your inventory. As supply chains grow more complex, manual planning using spreadsheets can cause losses. Yes, you can create them to be specific to your business but they are hindering your growth.
Now, more than ever, you have many affordable choices for improving your inventory investment and performance. The Cloud is a viable alternative to investing in On-Premise inventory software. Software-as-a-Service (SaaS) provides an affordable and flexible way to utilize some of the most powerful inventory planning solutions on the market.
Why should you be interested? SaaS applications provide many benefits you just cannot achieve on-premise. Benefits include:
Lower upfront capital: By going to a SaaS model, you avoid the up-front capital requirements and funding requests, and pay for the software as an on-going expense.
Faster implementation: There is generally less overall set-up time, and in some cases, companies can often leverage the hosted solution’s existing integrations with existing key ERP solutions.
Faster “time-to-value”: Given a more rapid implementation, the time-to-value and positive cash flow returns are more rapid than a traditionally deployed on-premise implementation.
Reduced internal IT resource requirements: No installed application software or hardware to manage over time.
Overcome objections to best-of-breed software: Some companies are finding that they are able to overcome the objections or rules against implementing software that does not come from the company’s ERP provider if they use a SaaS model.
Fit for “on-demand” usage: Users can truly access these solutions when they need them anytime and anywhere 24x7.
Staying current with technology: The software will periodically be automatically upgraded with enhancements to functionality. This should serve to keep users on the current platform, and keep them from falling behind the state of the art over time, sometimes badly so.
So, before you wait another moment, do yourself, your employees, and your customers a favor. Take a serious look at Cloud-based inventory planning and optimization solutions and begin 2015 with a clear path to success.
Advanced Inventory Planning – The Cloud – Omnichannel – Global Logistics
Changes are occurring at lightning speed for all of us today. Consumers and companies alike have to contend with minute-by-minute information and change. The Cloud – Advanced Inventory Planning – Omnichannel – Social Media and much more impact today’s businesses. The options dazzle the mind, do we stay the course or change a little or change a lot.
Cloud applications for business are becoming more plentiful. Solutions specifically built for the web are in great demand around the world. Companies are deciding to employ a cloud model to reduce capital and operational expenditure, reduce costs, increase business agility, and boost their ability to deliver IT on demand.
Cloud computing provides you with the flexibility you need for easy inventory planning. Cloud computing today has real meaning and positive impact for companies in a true global economy. The future is that more business applications for mobile computing will be available and virtual software appliances are being developed.
Companies approach their inventory planning in many different ways - from seat of the pants guessing, to team collaboration, to spreadsheets that may invoke more team collaboration and manual changes, to forecasting software and some to advanced planning solutions.
When it is all said and done most companies stay the course when it comes to inventory planning. There is fear to learning something new. Things can go wrong, lots of time to learn about new methods and ways of planning. Staying the course is felt to be safest route.
People are creatures of habit, which is one reason why spreadsheets and reports are reused from year to year. Unfortunately, after cutting and pasting information, the spreadsheet might not work the way it did before — formulas can be damaged, links can be broken, or cells can be overwritten. It is also a case of “you don’t know what you don’t know”. Meaning, people are unaware of the availability of easy to use affordable, automated inventory planning software.
One aspect that needs consideration is what are you competitors doing or likely to do. Are they staying the course or are they adopting new methods and technologies to improve their business performance?
Using custom reports and spreadsheets as the primary method in inventory planning is doing yourself, your company, and your customers a disservice. Using precious company resources to develop custom reports for inventory management is wasteful. Reports and spreadsheets are useful but not to manage your inventory. Instead, purchase a complete advanced inventory planning and optimization solution. It will reduce your planning time by up to 90% and dramatically improve your inventory mix while lowering costs.
The Cloud and advanced inventory planning is a winning combination. These combination of technologies allows you to work smarter by easily adapting all aspects of inventory management into one advanced, simple-to-use software product any time anywhere. The software lets all levels of employees understand and use the system. Instead of having one staff member dedicated to inventory planning, any employee can quickly learn and operate the software. Utilizing existing staff helps to keep costs low while expanding their capabilities.
Advanced inventory planning and optimization software not only automates the entire planning process, it dramatically increases the positive cash flow of a company. By smartly reducing inventory investment, reducing stock-outs, decreasing expedited shipping costs, and reducing planning time all contribute to more available cash. Add to that increased sales and productivity and the gains will also lead to an improved competitive advantage.
Anthony "Tony" Robbins is an American life coach, self-help author, and motivational speaker. He said, “Change happens when the pain of staying the same is greater than the pain of change.”
NetSuite demand planning capabilities enable inventory management and lean business operations. Purchasing and inventory managers can calculate demand based on historical data, sales forecasts, average trends, and seasonal fluctuations. NetSuite demand planning gives you full flexibility and control in manually setting timeframes, preferred stock levels, and other parameters. Close the loop by generating supply plans, creating, and executing purchase and work orders seamlessly.
As your business grows, you may need to explore how advanced inventory planning and optimization can take your business to the next level. Valogix, a global award-winning partner of NetSuite, has developed a specialized multi-stage planning engine that more effectively manages inventories.
VALOGIX® Inventory Planner simultaneously plans for items needed both in the manufacturing (production) process and sold separately as finished goods. This smooth-flow process is unique because it accurately plans the independent inventory based on its own parameters and demand. Most planning techniques for finished goods were borne out of the manufacturing process, which leave gaps in inventory coverage for distributors and retailers.
The on-going and ever-changing challenge
Inventory management and planning is getting more difficult due to rapidly changing demand patterns, the ever-increasing numbers of SKU’s and higher transportation costs. Even more challenging is effectively planning items that are commonly used in:
- kits (kitting & assembly)
- distribution & retail
- Based on known production master schedules, determine when to order inventory to
- support assemblies/production schedules.
- Traditional Material Requirements Planning (MRP) works very well with dependent demands from manufacturing orders only. It works with a time-phased planning approach to manage the back scheduling and creates an even flow of inventory.
- A major objective is the reduction of lead-time for demand signals to traverse the internal
- supply chain.
- A second objective is prediction of major “bullwhips” when multiple locations submit nearly
- simultaneous replenishment orders to the same supplying warehouse, rather than
- spreading these orders out uniformly across time.
- There is a Parent\Child relationship that is inherent in the planning process. Additionally,
- Substitutes and Supersedes further complicate a difficult process. This is also generally
- true for “kitting”.
Inventory Planning for Finished Goods
SAP Business One includes an MRP module for planning needs in a manufacturing environment. retailers and wholesale distributors also use the on-board functionality. Discover an affordable, seamlessly integrated inventory optimization solution to SAP Business One from Valogix.
However, you may want to explore how a more advanced inventory planning and optimization solution can further improve your supply chain performance. NetSuite recognized Valogix with their 2013 Supply Chain Partner of the year Award for successfully providing dynamic, automated multi-echelon planning and optimization.
Organizations with large inventory operations work with multiple levels of supply. Central sites purchase and stock most of the items. Slow-moving and less important items can be sent quickly to remote sites when needed, while fast-moving items are stored closer to the customer to enable more rapid customer service.
Advantages of the “multi-echelon” supply chain planning include:
- Consolidating inventory reduces the quantity required
- Consolidating purchasing gives greater leverage to obtain discounts from suppliers
- Balanced stock mix at all locations
Inventory planning for finished goods has become more complex and costly. The ever-increasing number of new Items (SKUs), changing demand patterns, and increasing transportation costs are taking a toll on a distributor’s bottom line. Especially difficult is planning items used both in kits and sold separately. Further complexity comes from planning for multiple locations and accounting for substitutes and supersedes.
Assume we have three locations supplied by a master warehouse, which has a planning horizon of 90 days. It also has a forecast of 90 units for that three-month period for an item.
Through the advanced algorithms in VALOGIX Inventory Planner, we can predict that:
• Location 1 will place a replenishment order for 30 units 16 days from now;
• Location 2 will place an order for 20 units in 27 days;
• Location 3 will place an order for 40 units in 7 days.
It is not just about having visibility and the capability to manually set safety stock and min/max levels for multiple locations. It is about having the right, balanced mix of items at the proper location at the right time. Using inventory optimization to dynamically plan and replenish multiple locations is a much better, proven method. That fact that the optimization is automated dramatically improves productivity and reaction time to changing demand.
What inventory optimization does is balance the investment in an inventory with the fill-rate (service level) goals of a company across all locations. There are also financial considerations, constraints that can also be applied in the development of the algorithm. These highly complex algorithms work behind the scene so as not to confuse the user or make them fearful of using optimization to help manage their inventory.
We have determined that you can dramatically improve the effectiveness of the optimization algorithms by adding heuristics into the overall process equation. Heuristic refers to experience-based techniques for problem solving, learning, and discovery. Heuristic methods are used to speed up the process of finding a satisfactory solution, where an exhaustive search is impractical. Valogix incorporates heuristics into all processes.
So consider the capabilities carefully when planning multiple locations:
Valogix automates the entire inventory planning process:
- Forecasting & Planning – every item at every location
- Stock Level Setting – considers forecast, lead time, order frequency,
- Desired service level and variability in demand
- Replenishment - Purchase Orders, Production Orders, Stock Transfers
- Easy to use and highly effective
- Avoids disruptions from costly stock-outs
- Exception based – alerts warn of potential future issues
- Planning Groups give unparalleled planning control & flexibility
- Items used in B.O.M.s and Kits as well as those sold independently
- Back-schedules to cover longest lead time of components
- Considers substitutes and supersedes
- Synchronized planning for smooth-flow inventory availability
- Reduced inventory by 20% to 40% or more usually within 6 months or less
- Reduced expediting and emergency shipments by 35% or more
- Improved productivity by reducing planning time by 60% to 80% or more
- Controlled and reduced replenishment spending by 15% or more
- Improved service levels by having the right items available when your customers want them by 5% to 15% or greater
- Reduced stock-outs by 15% - 30% or higher
- Increased sales of 15% to 15% or more
- Reduction in cost of goods by 5% to 10% due to improved vendor relations